Gold pared some early gains on Thursday as the dollar strengthened and markets awaited the outcome of a European Central Bank policy later in the day. Accommodative monetary policies favour gold and equities because low interest rates encourage investors to opt for assets that do not rely on interest yields.
Some of the shine was taken off gold's earlier move, which was driven by Chinese buying, as the US dollar edged higher, MKS PAMP Group trader Sam Laughlin said. The dollar index, which measures the greenback against a basket of currencies, was up 0.1 percent at 98.006. A stronger greenback makes dollar-denominated gold more expensive for holders of other currencies.
"The yellow metal will be looking toward support broadly between $1,265 - $1,267.90 (the 200-day moving average) for an extension to $1,277 to break above the 200-week moving average," Laughlin said.
Spot gold was up 0.1 percent at $1,272.20 an ounce as of 0651 GMT. On Wednesday, it had hit its strongest since October 5 at $1,273.34. US gold futures were up 0.2 percent at $1,271.80 an ounce. "We're looking for gold prices to rally further into the year-end. The market is waiting for the outcome of the (US)presidential elections in November and what the Fed is going to do in December," said OCBC analyst Barnabas Gan.
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